BILL NUMBER: AB 1509	CHAPTERED  07/05/00

	CHAPTER   74
	FILED WITH SECRETARY OF STATE   JULY 5, 2000
	APPROVED BY GOVERNOR   JULY 5, 2000
	PASSED THE SENATE   JUNE 22, 2000
	PASSED THE ASSEMBLY   JUNE 22, 2000
	AMENDED IN SENATE   JUNE 22, 2000
	AMENDED IN SENATE   AUGUST 31, 1999
	AMENDED IN SENATE   AUGUST 16, 1999
	AMENDED IN ASSEMBLY   MAY 18, 1999

INTRODUCED BY   Assembly Member Machado

                        FEBRUARY 26, 1999

   An act to amend Sections 22008, 22102, 22105, 22107, 22108, 22132,
22140, 22161.5, 22304, 22309, 22453, 22651, 22652, 22655, 22656,
22658, 22659, 22660, 22661, 22662, 22664, 22665, 22706, 23100,
24202.5, 24206, 24402, 24411, 24412, 24415, 24417, and 24600 of, to
amend and renumber Sections 25000, 25100, 25110, 25115, 25120, and
25125 of, to add Sections 22101.5, 22104.7, 22104.9, 22105.5,
22122.7, 22127.2, 22133.5, 22139.5, 22146.7, 22156.05, 22166.5,
22176, 22302, 22311.5, 22311.7, 24300.5, and 24305.3 to, to add
Chapter 38 (commencing with Section 25000) to Part 13 of Division 1
of Title 1 of, to add and repeal Section 22901.5, and to repeal and
add Sections 22162, 22311, 22460, 22906, 23300, and 23881 of, the
Education Code, relating to state teachers' retirement.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1509, Machado.   State teachers' retirement:  Defined Benefit
Supplement Program.
   The Teachers' Retirement Law establishes the Defined Benefit
Program, which provides specified service and disability retirement
benefits to members, and requires those members and their employers
to make specified contributions to the Teachers' Retirement Fund for
that purpose.
   This bill would establish the Defined Benefit Supplement Program,
as specified, pursuant to which members of the Defined Benefit
Program would receive supplemental retirement, disability, final, or
termination benefits, payable in a lump-sum or annuity, as specified.
  The bill would require 25% of each member's contributions to the
Teachers' Retirement Fund to be allocated to the program for a
specified period and would make related technical and conforming
changes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 22008 of the Education Code is amended to read:

   22008.  For the purposes of payments into or out of the retirement
fund for adjustments of errors or omissions with respect to the
Defined Benefit Program or the Defined Benefit Supplement Program,
the period of limitation of actions shall be applied, except as
provided in Sections 23302 and 24613, as follows:
   (a) No action may be commenced by or against the board, the
system, or the plan more than three years after all obligations to or
on behalf of the member, former member, beneficiary, or annuity
beneficiary have been discharged.
   (b) If the system makes an error that results in incorrect payment
to a member, former member, beneficiary, or annuity beneficiary, the
system's right to commence recovery shall expire three years from
the date the incorrect payment was made.
   (c) If an incorrect payment is made due to lack of information or
inaccurate information regarding the eligibility of a member, former
member, beneficiary, or annuity beneficiary to receive benefits under
the Defined Benefit Program or Defined Benefit Supplement Program,
the period of limitation shall commence with the discovery of the
incorrect payment.
   (d) Notwithstanding any other provision of this section, if an
incorrect payment has been made on the basis of fraud or intentional
misrepresentation by a member, beneficiary, annuity beneficiary, or
other party in relation to or on behalf of a member, beneficiary, or
annuity beneficiary, the three-year period of limitation shall not be
deemed to commence or to have commenced until the system discovers
the incorrect payment.
   (e) The collection of overpayments under subdivisions (b), (c),
and (d) shall be made pursuant to Section 24617.
  SEC. 2.  Section 22102 of the Education Code is amended to read:
   22102.  "Accumulated retirement contributions" means the sum of
the member contributions, the member contributions picked up by an
employer pursuant to Sections 22903 and 22904, and credited interest
on those contributions.  Accumulated retirement contributions shall
not include accumulated annuity deposit contributions, accumulated
tax-sheltered annuity contributions, accumulated Defined Benefit
Supplement contributions, or additional earnings credit.
  SEC. 3.  Section 22101.5 is added to the Education Code, to read:
   22101.5.  "Accumulated Defined Benefit Supplement account balance"
means an amount equal to the sum of member contributions, the member
contributions picked up by an employer, employer contributions, and
interest credited on those contributions pursuant to Section 25005,
that are credited by the system to the member's Defined Benefit
Supplement account.
  SEC. 4.  Section 22104.7 is added to the Education Code, to read:
   22104.7.  "Additional earnings credit" means an amount derived
from investment income for the plan year as determined by the board
by plan amendment and added to members' Defined Benefit Supplement
accounts in addition to the amount credited at the minimum interest
rate for that plan year.
  SEC. 5.  Section 22104.9 is added to the Education Code, to read:
   22104.9.  "Annuitant Reserve" means a segregated account within
the retirement fund established and maintained for expenditure on
annuities payable under the Defined Benefit Supplement Program.
  SEC. 6.  Section 22105 of the Education Code is amended to read:
   22105.  (a) "Annuity," with respect to the Defined Benefit
Program, means payments for life derived from the "accumulated
annuity deposit contributions" of a member.
   (b) "Annuity," with respect to the Defined Benefit Supplement
Program, means an alternative payment arrangement wherein a benefit
based on the balance of credits in a member's Defined Benefit
Supplement account is paid monthly rather than in a lump-sum.
  SEC. 7.  Section 22105.5 is added to the Education Code, to read:
   22105.5.  "Annuity beneficiary" means the person or persons
designated by a member pursuant to Section 25011 or 25018 to receive
an annuity under the Defined Benefit Supplement Program upon the
member's death.
  SEC. 8.  Section 22107 of the Education Code is amended to read:
   22107.  (a) "Beneficiary," with respect to the Defined Benefit
Program, means any person or entity receiving or entitled to receive
an allowance or lump-sum payment under the Defined Benefit Program
because of the disability or death of a member.
   (b) "Beneficiary," with respect to the Defined Benefit Supplement
Program, means any person or entity receiving or entitled to receive
a final benefit under the Defined Benefit Supplement Program upon the
death of a member.
  SEC. 9.  Section 22108 of the Education Code is amended to read:
   22108.  (a) "Benefit" or "benefits," with respect to the Defined
Benefit Program, means any monthly payment due a retired member,
disabled member, or beneficiary, and includes lump-sum payments due
on account of death.
   (b) "Benefit" and "benefits," with respect to the Defined Benefit
Supplement Program, means an amount equal to the balance of credits
in a member's Defined Benefit Supplement account.
  SEC. 10.  Section 22122.7 is added to the Education Code, to read:

   22122.7.  "Defined Benefit Supplement contributions" means member
contributions and employer contributions that are credited by the
system to the member's Defined Benefit Supplement account pursuant to
Section 25004.
  SEC. 11.  Section 22127.2 is added to the Education Code, to read:

   22127.2.  "Disability benefit" means the amount payable under the
Defined Benefit Supplement Program based on the balance of credits in
a member's Defined Benefit Supplement account to either a disabled
member pursuant to Section 24005 or to a member who retired for
disability pursuant to Section 24105.
  SEC. 12.  Section 22132 of the Education Code is amended to read:
   22132.  "Employed" or "employment" means employment to perform
creditable service subject to coverage under the Defined Benefit
Program or the Defined Benefit Supplement Program, except as
otherwise specifically provided under this part.
  SEC. 13.  Section 22133.5 is added to the Education Code, to read:

   22133.5.  "Final benefit" means the amount payable to a
beneficiary under the Defined Benefit Supplement Program upon the
death of the member.
  SEC. 14.  Section 22139.5 is added to the Education Code, to read:

   22139.5.  "Gain and Loss Reserve" means a segregated account
within the retirement fund that is established and maintained to do
either of the following:
   (a) Credit interest to members' Defined Benefit Supplement
accounts at the minimum interest rate for plan years in which the
board determines that the obligation cannot be met from the plan's
investment earnings with respect to the Defined Benefit Supplement
Program.
   (b) Provide additions to the Annuitant Reserve to meet the plan's
obligation for annuities payable under the Defined Benefit Supplement
Program.
  SEC. 15.  Section 22140 of the Education Code is amended to read:
   22140.  (a) "Improvement factor," with respect to the Defined
Benefit Program, means an increase of 2 percent in monthly
allowances.  The improvement factor shall be added to a monthly
allowance each year on September 1, commencing on September 1
following the first anniversary of the effective date of retirement,
or the date on which the monthly allowance commenced to accrue to any
beneficiary, or other periods specifically stated in this part.
   (b) "Improvement factor," with respect to the Defined Benefit
Supplement Program, means an increase of 2 percent in monthly
annuities. The improvement factor shall be added to a monthly annuity
each year on September 1, commencing on the September 1 following
the first anniversary of the date the annuity first became payable.
   (c) The improvement factor shall not be compounded nor shall it be
applicable to annuities payable from the accumulated annuity deposit
contributions or the accumulated tax-sheltered annuity
contributions.  The Legislature reserves the right to adjust the
amount of the improvement factor up or down as economic conditions
dictate.  No adjustments of the improvement factor shall reduce the
monthly retirement allowance or annuity below that which would be
payable to the recipient under this part had this section not been
enacted.
  SEC. 16.  Section 22146.7 is added to the Education Code, to read:

   22146.7.  "Minimum interest rate" means the annual interest rate
determined by the board by plan amendment at which interest shall be
credited to Defined Benefit Supplement accounts for a plan year.
  SEC. 17.  Section 22156.05 is added to the Education Code, to read:

   22156.05.  "Plan year" means the period of time beginning on July
1 of one calendar year and ending on June 30 of the following
calendar year. For purposes of the Defined Benefit Supplement
Program, the board shall designate by plan amendment the initial plan
year.
  SEC. 18.  Section 22161.5 of the Education Code is amended to read:

   22161.5.  "Refund" means the lump-sum return of a member's
accumulated retirement contributions under the Defined Benefit
Program and does not include accumulated contributions credited to
the Defined Benefit Supplement Program.
  SEC. 19.  Section 22162 of the Education Code is repealed.
  SEC. 20.  Section 22162 is added to the Education Code, to read:
   22162.  "Regular interest" means interest that is compounded
annually based on the annual equivalent of the prior year's average
yield to maturity on the investment-grade fixed income securities
attributable to the Defined Benefit Program, but not on assets
attributable to the Defined Benefit Supplement Program. The regular
interest rate shall be adopted annually by the board as a plan
amendment with respect to the Defined Benefit Program.
  SEC. 21.  Section 22166.5 is added to the Education Code, to read:

   22166.5.  "Retirement benefit" means the amount payable under the
Defined Benefit Supplement Program, based on the balance of credits
in the member's Defined Benefit Supplement account, to a member who
has retired for service under the Defined Benefit Program.
  SEC. 22.  Section 22176 is added to the Education Code, to read:
   22176.  "Termination benefit" means a benefit equal in amount to
the balance of credits in the member's Defined Benefit Supplement
account that is payable to the member in a lump-sum when the member
has terminated all employment to perform creditable service subject
to coverage by the plan.
  SEC. 23.  Section 22302 is added to the Education Code, to read:
   22302.  The board may contract with a qualified third-party
administrator for custodial, record keeping, or other administrative
services necessary to carry into effect the provisions of Chapter 38
(commencing with Section 25000) of this part or Part 14.
  SEC. 24.  Section 22304 of the Education Code is amended to read:
   22304.  (a) The costs of administration of the plan shall be paid
from the retirement fund and those costs may not exceed the amount
made available by law during any fiscal period.
   (b) The administrative costs of the plan shall be divided
proportionately in accordance with the assets of the Defined Benefit
Program, the Defined Benefit Supplement Program, and the Cash Balance
Benefit Program.
  SEC. 25.  Section 22309 of the Education Code is amended to read:
   22309.  (a) The board shall issue to each active and inactive
member, no less frequently than annually after the close of the
school year, a statement of the member's individual Defined Benefit
Program and Defined Benefit Supplement accounts, provided the
employer or member has informed the system of the member's current
mailing address.
   (b) The board shall periodically make a good faith effort to
locate inactive members to provide these members with information
concerning any benefit for which they may be eligible.
  SEC. 26.  Section 22311 of the Education Code is repealed.
  SEC. 27.  Section 22311 is added to the Education Code, to read:
   22311.  The board shall maintain all data necessary to perform an
actuarial investigation of the demographic and economic experience of
the plan and for the actuarial valuation of the assets and
liabilities of the plan.
  SEC. 28.  Section 22311.5 is added to the Education Code, to read:

   22311.5.  The board shall acquire the services of an actuary to do
all of the following:
   (a) Make recommendations to the board for the adoption of
actuarial assumptions that, in the aggregate, are reasonably related
to the past experience of the plan and reflect the actuary's informed
estimate of the future experience.
   (b) Make an actuarial investigation of the demographic and
economic experience, including the mortality, service, and other
experience, of the plan with respect to members and beneficiaries of
the Defined Benefit Programs; members, beneficiaries, and annuity
beneficiaries of the Defined Benefit Supplement Program; and
participants and beneficiaries of the Cash Balance Benefit Program.
   (c) Make an annual actuarial review of the goals regarding the
sufficiency of the Gain and Loss Reserves with respect to the Defined
Benefit Supplement Program and the Cash Balance Benefit Program and
recommend to the board the goal for maintaining sufficient Gain and
Loss Reserves for the Defined Benefit Supplement Program and the Cash
Balance Benefit Program.
   (d) Recommend to the board the amount, if any, to be transferred
to the separate Gain and Loss Reserves from the investment earnings
of the plan with respect to the Defined Benefit Supplement Program
and the Cash Balance Benefit Program.
   (e) At least once every six years with respect to the Defined
Benefit Program and annually with respect to the Defined Benefit
Supplement Program and the Cash Balance Benefit Program, using
actuarial assumptions adopted by the board, perform an actuarial
valuation of the plan that identifies the assets and liabilities of
the plan, and report the findings to the board. The report of the
actuary on the results of the actuarial valuation shall identify and
include the components of normal cost and adequate information to
determine the effects of changes in actuarial assumptions.  Copies of
the report on the actuarial valuation shall be transmitted to the
Governor and to the Legislature.
   (f) Recommend to the board all rates and factors necessary to
administer the plan, including, but not limited to, mortality tables,
annuity factors, interest rates, and additional earnings credits.
   (g) Recommend to the board a strategy for amortizing any unfunded
actuarial obligation.
   (h) As requested by the board, perform any other actuarial
services that may be required for administration of the plan.
  SEC. 29.  Section 22311.7 is added to the Education Code, to read:

   22311.7.  Upon the basis of the actuarial investigation and
actuarial valuation pursuant to Section 22311.5, or any part thereof,
the board shall adopt by plan amendment actuarial assumptions,
rates, factors, and tables as the board determines are necessary for
administration of the plan and its programs.
  SEC. 30.  Section 22453 of the Education Code is amended to read:
   22453.  (a) Except as provided in Section 22454, the signature of
the spouse of a member shall be required on any application for, or
cancellation of, an unmodified allowance; any application for, or
cancellation of, an annuity or termination benefit under the Defined
Benefit Supplement Program; the election, change, or cancellation of
an option; or any request for a refund of the member's accumulated
retirement contributions or accumulated annuity deposit
contributions, or any other requests related to the selection of
benefits by a member in which a spousal interest may be present,
unless the member declares, in writing, under penalty of perjury,
that one of the following conditions exists:
   (1) The member does not know, and has taken all reasonable steps
to determine, the whereabouts of the spouse.
   (2) The spouse is incapable of executing the acknowledgment
because of an incapacitating mental or physical condition.
   (3) The member and spouse have executed a marriage settlement
agreement pursuant to Part 5 (commencing with Section 1500) of
Division 4 of the Family Code that makes the community property law
inapplicable to the marriage.
   (4) The member is not married.
   (5) The current spouse has no identifiable community property
interest in the benefit.
   (b) This section is not applicable to an application for a
disability allowance.
   (c) The sole purpose of this section is to provide for spousal
protection in the selection of specified benefits made by a member.

  SEC. 31.  Section 22460 of the Education Code is repealed.
  SEC. 32.  Section 22460 is added to the Education Code, to read:
   22460.  (a) If a member terminates employment with less than five
years of credited service, the employer shall notify the member of
the following:
   (1) That unless the member is eligible, or becomes eligible in the
future, for concurrent retirement pursuant to paragraph (2) of
subdivision (a) of Section 24201, the member is eligible only for a
refund of accumulated retirement contributions and the return of an
amount equal to the balance of credits in the member's Defined
Benefit Supplement account.
   (2) The current rate of interest that shall be earned on
accumulated retirement contributions that are not refunded and the
current minimum interest rate that shall be applied to the balance of
credits in the member's Defined Benefit Supplement account.
   (3) Actions that may be taken by the board if accumulated
retirement contributions are not refunded and an amount equal to the
balance of credits in the member's Defined Benefit Supplement account
are not returned.
   (b) Employers shall transmit to a member who terminates employment
with less than five years of credited service the information
specified in subdivision (a) as part of the usual separation
documents.
  SEC. 33.  Section 22651 of the Education Code is amended to read:
   22651.  For purposes of this chapter and Section 23300, "nonmember
spouse" means a member's spouse or former spouse who is being or has
been awarded a community property interest in the service credit,
accumulated retirement contributions, accumulated Defined Benefit
Supplement account balance, or benefits of the member under this
part.  A nonmember spouse who is awarded a separate account of
service credit and accumulated retirement contributions, who is
awarded a separate account based on the balance of credits in the
member's Defined Benefit Supplement account, who receives a
retirement allowance or retirement annuity under this part, or who is
awarded an interest in a member's retirement allowance or retirement
annuity under this part is not a member.
  SEC. 34.  Section 22652 of the Education Code is amended to read:
   22652.  (a) Upon the legal separation or dissolution of marriage
of a member, other than a retired member, the court shall include in
the judgment or a court order the date on which the parties
separated.
   (b) The court may order in the judgment or court order that the
accumulated retirement contributions and service credit or an amount
equal to the balance of credits in the member's Defined Benefit
Supplement account under this part that are attributable to periods
of service during the marriage be divided into two separate and
distinct accounts in the name of the member and the nonmember spouse,
respectively.  Any service credit, accumulated retirement
contributions, or amount equal to the balance of credits in the
member's Defined Benefit Supplement account under this part that are
not explicitly awarded by the judgment or court order shall be deemed
the exclusive property of the member under the Defined Benefit
Program or the Defined Benefit Supplement Program.
   (c) The determination of the court of community property rights
pursuant to this section shall be consistent with this chapter and
shall address the rights of the nonmember spouse under this part,
including, but not limited to, the following:
   (1) The right to a retirement allowance and, if applicable, a
retirement annuity.
   (2) The right to a refund of accumulated retirement contributions
and the lump-sum payment of an amount equal to the balance of credits
in the member's Defined Benefit Supplement account that were awarded
to the nonmember spouse.
   (3) The right to redeposit accumulated retirement contributions
previously refunded to the member which the member is eligible to
redeposit pursuant to Sections 23200 to 23203, inclusive, and shall
specify the shares of the redeposit amount awarded to the member and
the nonmember spouse.
   (4) The right to purchase additional service credit that the
member is eligible to purchase pursuant to Sections 22800 to 22810,
inclusive, and shall specify the shares of the additional service
credit awarded to the member and the nonmember spouse.
  SEC. 35.  Section 22655 of the Education Code is amended to read:
   22655.  (a) Upon the legal separation or dissolution of marriage
of a retired member, the court may include in the judgment or court
order a determination of the community property rights of the parties
in the retired member's retirement allowance and, if applicable,
retirement annuity under this part consistent with this section.
Upon election under subparagraph (B) of paragraph (3) of subdivision
(a) of Section 2610 of the Family Code, the court order awarding the
nonmember spouse a community property share in the retirement
allowance or retirement annuity, or both, of a retired member shall
be consistent with this section.
   (b) If the court does not award the entire retirement allowance or
retirement annuity under this part to the retired member and the
retired member is receiving a retirement allowance that has not been
modified pursuant to Section 24300, or a single life annuity pursuant
to Section 25011 or 25018, the court shall require only that the
system pay the nonmember spouse, by separate warrant, his or her
community property share of the retired member's retirement allowance
or retirement annuity, or both, under this part.
   (c) If the court does not award the entire retirement allowance or
retirement annuity under this part to the retired member and the
retired member is receiving an allowance that has been actuarially
modified pursuant to Section 24300, or a joint and survivor annuity
pursuant to Section 25011 or 25018, the court shall order only one of
the following:
   (1) The retired member shall maintain the retirement allowance or
retirement annuity, or both, under this part without change.
   (2) The retired member shall cancel the option that modified the
retirement allowance under this part pursuant to Section 24305 and
select a new joint and survivor option or a new beneficiary or both,
and the system shall pay the nonmember spouse, by separate warrant,
his or her community property share of the retirement allowance under
this part of the retired member, the option beneficiary, or both.
   (3) The retired member shall cancel the joint and survivor annuity
under which the retirement annuity is being paid pursuant to Section
24305.5, and select a new joint and survivor annuity or a new
annuity beneficiary or both, and the system shall pay the nonmember
spouse, by separate warrant, his or her community property share of
the retirement annuity payable to the retired member, the annuity
beneficiary, or both.
   (4) The retired member shall take the action specified in both
paragraphs (2) and (3).
   (5) The retired member shall cancel the option that modified the
retirement allowance under this part pursuant to Section 24305 and
select an unmodified retirement allowance and the system shall pay
the nonmember spouse, by separate warrant, his or her community
property share of the retired member's retirement allowance under
this part.
   (6) The retired member shall cancel the joint and survivor annuity
under which the retirement annuity is being paid pursuant to Section
24305.5, and select a single life annuity, and the system shall pay
the nonmember spouse, by separate warrant, his or her community
property share of the retirement annuity payable to the retired
member.
   (7) The retired member shall take the action specified in both
paragraphs (5) and (6).
   (d) If the option beneficiary or annuity beneficiary or both under
this part, other than the nonmember spouse, predeceases the retired
member, the court shall order the retired member to select a new
option beneficiary pursuant to Section 24306, or a new annuity
beneficiary pursuant to Section 24305.3 and shall order the system to
pay the nonmember spouse, by separate warrant, his or her share of
the community property interest in the retirement allowance or
retirement annuity or both under this part of the retired member or
the new option beneficiary or annuity beneficiary or each of them.
   (e) The right of the nonmember spouse to receive his or her
community property share of the retired member's retirement allowance
or retirement annuity or both under this section shall terminate
upon the death of the nonmember spouse.  However, the nonmember
spouse may designate a beneficiary under the Defined Benefit Program
and a payee under the Defined Benefit Supplement Program to receive
his or her community property share of the retired member's
accumulated retirement contributions and accumulated Defined Benefit
Supplement account balance under this part in the event that there
are remaining accumulated retirement contributions and a balance in
the member's Defined Benefit Supplement account to be paid upon the
death of the nonmember spouse.
  SEC. 36.  Section 22656 of the Education Code is amended to read:
   22656.  No judgment or court order issued pursuant to this chapter
is binding on the system with respect to the Defined Benefit Program
or the Defined Benefit Supplement Program until the system has been
joined as a party to the action and has been served with a certified
copy of the judgment or court order.
  SEC. 37.  Section 22658 of the Education Code is amended to read:
   22658.  (a) A separate account awarded to a nonmember spouse
pursuant to Section 22652 shall be administered independently of the
member's account.
   (b) An accumulated Defined Benefit Supplement account balance,
accumulated retirement contributions, service credit, and final
compensation attributable to a separate account of a nonmember spouse
under this part shall not be
          combined in any way or for any purpose with the accumulated
Defined Benefit Supplement account balance, accumulated retirement
contributions, service credit, and final compensation of any other
separate account of the nonmember spouse.
   (c) An accumulated Defined Benefit Supplement account balance,
accumulated retirement contributions, service credit, and final
compensation attributable to the separate account of a nonmember
spouse shall not be combined in any way or for any purpose with the
accumulated Defined Benefit Supplement account balance, accumulated
retirement contributions, service credit, and final compensation of
an account that exists under this part because the nonmember spouse
is employed or has been employed to perform creditable service
subject to coverage under the Defined Benefit Program or the Defined
Benefit Supplement Program.
  SEC. 38.  Section 22659 of the Education Code is amended to read:
   22659.  Upon being awarded a separate account or an interest in
the retirement allowance or retirement annuity of a retired member
under this part, a nonmember spouse shall provide the system with
proof of his or her date of birth, social security number, and any
other information requested by the system, in the form and manner
requested by the system.
  SEC. 39.  Section 22660 of the Education Code is amended to read:
   22660.  (a) The nonmember spouse who is awarded a separate account
under this part shall have the right to designate, pursuant to
Sections 23300 to 23304, inclusive, a beneficiary or beneficiaries to
receive the accumulated retirement contributions under the Defined
Benefit Program and to designate a payee to receive the accumulated
Defined Benefit Supplement account balance under the Defined Benefit
Supplement Program remaining in the separate account of the nonmember
spouse on his or her date of death, and any accrued allowance or
accrued Defined Benefit Supplement annuity under this part
attributable to the separate account of the nonmember spouse which is
unpaid on the date of the death of the nonmember spouse.
   (b) This section shall not be construed to provide the nonmember
spouse with any right to elect to modify a retirement allowance under
Section 24300 or to elect a joint and survivor annuity under the
Defined Benefit Supplement Program.
  SEC. 40.  Section 22661 of the Education Code is amended to read:
   22661.  (a) The nonmember spouse who is awarded a separate account
under this part shall have the right to a refund of the accumulated
retirement contributions in the account, and a lump-sum payment of
the balance of credits in the Defined Benefit Supplement account, of
the nonmember spouse under this part.
   (b) The nonmember spouse shall file an application on a form
provided by the system to obtain a refund or lump-sum payment.
   (c) The refund and lump-sum payment under this part are effective
when the system deposits in the United States mail an initial warrant
drawn in favor of the nonmember spouse and addressed to the latest
address for the nonmember spouse on file in the system.  If the
nonmember spouse has elected on a form provided by the system to
transfer all or a specified portion of the accumulated retirement
contributions or the accumulated Defined Benefit Supplement account
balance that are eligible for direct trustee-to-trustee transfer to
the trustee of a qualified plan under Section 402 of the Internal
Revenue Code of 1986 (26 U.S.C.A. Sec. 402), deposit in the United
States mail of a notice that the requested transfer has been made
constitutes a return of the nonmember spouse's accumulated retirement
contributions or accumulated Defined Benefit Supplement account
balance.
   (d) The nonmember spouse is deemed to have permanently waived all
rights and benefits pertaining to the service credit, accumulated
retirement contributions, and the accumulated Defined Benefit
Supplement account balance under this part when the refund and
lump-sum payment become effective.
   (e) The nonmember spouse may not cancel a refund or lump-sum
payment under this part after it is effective.
   (f) The nonmember spouse shall have no right to elect to redeposit
the refunded accumulated retirement contributions under this part
after the refund is effective, to redeposit under Section 22662 or
purchase additional service credit under Section 22663 after the
refund becomes effective, or to redeposit the accumulated Defined
Benefit Supplement account balance after the lump-sum payment becomes
effective.
   (g) If the total service credit in the separate account of the
nonmember spouse under this part, including service credit purchased
under Sections 22662 and 22663, is less than two and one-half years,
the board shall refund the accumulated retirement contributions in
the account.
  SEC. 41.  Section 22662 of the Education Code is amended to read:
   22662.  The nonmember spouse who is awarded a separate account
under this part may redeposit accumulated retirement contributions
previously refunded to the member in accordance with the
determination of the court pursuant to Section 22652.
   (a) The nonmember spouse may redeposit under this part only those
accumulated retirement contributions that were previously refunded to
the member and in which the court has determined the nonmember
spouse has a community property interest.
   (b) The nonmember spouse shall inform the system in writing of his
or her intent to redeposit within 180 days after the judgment or
court order addressing the redeposit rights of the nonmember spouse
is entered.  The nonmember spouses' election to redeposit shall be
made on a form provided by the system within 30 days after the system
mails an election form and the billing.
   (c) If the nonmember spouse elects to redeposit under this part,
he or she shall repay the portion of the member's refunded
accumulated retirement contributions that were awarded to the
nonmember spouse and shall pay regular interest from the date of the
refund to the date of payment.
   (d) An election to redeposit shall be considered an election to
repay all accumulated retirement contributions previously refunded
under this part in which the nonmember spouse has a community
property interest.  All payments shall be received by the system
before the effective date of the nonmember spouse's retirement under
this part.  If any payment due because of the election is not
received at the system's office in Sacramento within 120 days of its
due date, the election shall be canceled and any payments made under
the election shall be returned to the nonmember spouse.
   (e) The right of the nonmember spouse to redeposit shall be
subject to Section 23203.
   (f) The member shall not have a right to redeposit the share of
the nonmember spouse in the previously refunded accumulated
retirement contributions under this part whether or not the nonmember
spouse elects to redeposit.  However, any accumulated retirement
contributions previously refunded under this part and not explicitly
awarded to the nonmember spouse under this part by the judgment or
court order shall be deemed the exclusive property of the member.
  SEC. 42.  Section 22664 of the Education Code is amended to read:
   22664.  The nonmember spouse who is awarded a separate account
shall have the right to a service retirement allowance and, if
applicable, a retirement annuity under this part.
   (a) The nonmember spouse shall be eligible to retire for service
under this part if the following conditions are satisfied:
   (1) The member had at least five years of credited service during
the period of marriage, at least one year of which had been performed
subsequent to the most recent refund to the member of accumulated
retirement contributions.  The credited service may include service
credited to the account of the member as of the date of the
dissolution or legal separation, previously refunded service,
out-of-state service, and permissive service credit that the member
is eligible to purchase at the time of the dissolution or legal
separation.
   (2) The nonmember spouse has at least two and one-half years of
credited service in his or her separate account.
   (3) The nonmember spouse has attained the age of 55 years or more.

   (b) A service retirement allowance of a nonmember spouse under
this part shall become effective upon any date designated by the
nonmember spouse, provided:
   (1) The requirements of subdivision (a) are satisfied.
   (2) The nonmember spouse has filed an application for service
retirement on a form provided by the system, that is executed no
earlier than six months before the effective date of the retirement
allowance.
   (3) The effective date is no earlier than the first day of the
month in which the application is received at the system's office in
Sacramento and the effective date is after the date the judgment or
court order pursuant to Section 22652 was entered.
   (c) (1) Upon service retirement at normal retirement age under
this part, the nonmember spouse shall receive a retirement allowance
that shall consist of an annual allowance payable in monthly
installments equal to 2 percent of final compensation for each year
of credited service.
   (2) If the nonmember spouse's retirement is effective at less than
normal retirement age and between early retirement age under this
part and normal retirement age, the retirement allowance shall be
reduced by one-half of 1 percent for each full month, or fraction of
a month, that will elapse until the nonmember spouse would have
reached normal retirement age.
   (3) If the nonmember spouse's service retirement is effective at
an age greater than normal retirement age and is effective on or
after January 1, 1999, the percentage of final compensation for each
year of credited service shall be determined pursuant to the
following table:


  Age at Retirement                Percentage
  60 1/4 ........................  2.033
  60 1/2 ........................  2.067
  60 3/4 ........................  2.10
  61 ............................  2.133
  61 1/4 ........................  2.167
  61 1/2 ........................  2.20
  61 3/4 ........................  2.233
  62 ............................  2.267
  62 1/4 ........................  2.30
  62 1/2 ........................  2.333
  62 3/4 ........................  2.367
  63 and over ...................  2.40

   (4) In computing the retirement allowance of the nonmember spouse,
the age of the nonmember spouse on the last day of the month in
which the retirement allowance begins to accrue shall be used.
   (5) Final compensation, for purposes of calculating the service
retirement allowance of the nonmember spouse under this subdivision,
shall be calculated according to the definition of final compensation
in Section 22134, 22135, or 22136, whichever is applicable, and
shall be based on the compensation earnable of the member up to the
date the parties separated, as established in the judgment or court
order pursuant to Section 22652.
   The nonmember spouse shall not be entitled to use any other
calculation of final compensation.
   (d) If the member is or was receiving a disability allowance under
this part with an effective date before or on the date the parties
separated as established in the judgment or court order pursuant to
Section 22652, or at any time applies for and receives a disability
allowance with an effective date that is before or coincides with the
date the parties separated as established in the judgment or court
order pursuant to Section 22652, the nonmember spouse shall not be
eligible to retire until after the disability allowance of the member
terminates.
   If the member who is or was receiving a disability allowance
returns to employment to perform creditable service subject to
coverage under the Defined Benefit Program or has his or her
allowance terminated under Section 24015, the nonmember spouse may
not be paid a retirement allowance until at least six months after
termination of the disability allowance and the return of the member
to employment to perform creditable service subject to coverage under
the Defined Benefit Program, or the termination of the disability
allowance and the employment or self-employment of the member in any
capacity, notwithstanding Section 22132.  If at the end of the
six-month period, the member has not had a recurrence of the original
disability or has not had his or her earnings fall below the amounts
described in Section 24015, the nonmember spouse may be paid a
retirement allowance if all other eligibility requirements are met.
   (1) The retirement allowance of the nonmember spouse under this
subdivision shall be calculated as follows:  the disability allowance
the member was receiving, exclusive of the portion for dependent
children, shall be divided between the share of the member and the
share of the nonmember spouse.  The share of the nonmember spouse
shall be the amount obtained by multiplying the disability allowance,
exclusive of the portion for dependent children, by the years of
service credited to the separate account of the nonmember spouse,
including service projected to the date of separation, and dividing
by the projected service of the member.  The nonmember spouse's
retirement allowance shall be the lesser of the share of the
nonmember spouse under this subdivision or the retirement allowance
under subdivision (c).
   (2) The share of the member shall be the total disability
allowance reduced by the share of the nonmember spouse.  The share of
the member shall be considered the disability allowance of the
member for purposes of Section 24213.
   (e) The nonmember spouse who receives a retirement allowance is
not a retired member under this part.  However, the allowance of the
nonmember spouse shall be increased by application of the improvement
factor and shall be eligible for the application of supplemental
increases and other benefit maintenance provisions under this part,
including, but not limited to, Sections 24411, 24412, and 24415 based
on the same criteria used for the application of these benefit
maintenance increases to the service retirement allowances of
members.
  SEC. 43.  Section 22665 of the Education Code is amended to read:
   22665.  The system shall include the service credit awarded to a
nonmember spouse in the judgment or court order to determine the
eligibility of a member for a retirement or disability allowance
under this part.  That portion of awarded service credit based on
previously refunded accumulated retirement contributions or on
permissive service credit may not be used by the member for
eligibility requirements until the member has redeposited or
purchased his or her portion of the service credit.  The member's
service retirement allowance shall be calculated based on the service
credit in the member's account on the effective date of service
retirement.
  SEC. 44.  Section 22706 of the Education Code is amended to read:
   22706.  A member shall not receive credit for service performed
while receiving a retirement or disability allowance under the
Defined Benefit Program or while receiving a retirement or disability
annuity under the Defined Benefit Supplement Program.
  SEC. 45.  Section 22901.5 is added to the Education Code, to read:

   22901.5.  (a) Notwithstanding Section 22905, 25 percent of the
member's contribution pursuant to Section 22901 (2 percent of
creditable compensation) shall be credited to the member's Defined
Benefit Supplement account pursuant to Section 25004.
   (b) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends
that date.
  SEC. 46.  Section 22906 of the Education Code is repealed.
  SEC. 47.  Section 22906 is added to the Education Code, to read:
   22906.  A member's accumulated retirement contributions that were
made with respect to service that was erroneously credited under the
Defined Benefit Program shall be returned to the member.
  SEC. 48.  Section 23100 of the Education Code is amended to read:
   23100.  (a) Upon the termination of a member's employment by any
cause other than death, disability, or retirement there shall be paid
to the member, pursuant to this part, each of the following:
   (1) The member's accumulated retirement contributions made after
June 30, 1935.
   (2) The member's accumulated annuity deposit contributions.
   (3) An amount equal to the balance of credits in the member's
Defined Benefit Supplement account.
   (b) Accumulated retirement contributions and accumulated annuity
deposit contributions shall include credited interest through the
date of payment.
  SEC. 49.  Section 23300 of the Education Code is repealed.
  SEC. 50.  Section 23300 is added to the Education Code, to read:
   23300.  (a) A member of the Defined Benefit Program may designate
a beneficiary to receive benefits payable under this part upon the
member's death.  A beneficiary designation may not be made in
derogation of a nonmember spouse's community property interest with
respect to service or contributions credited under this part unless
the nonmember spouse has previously obtained an alternative order
pursuant to Section 2610 of the Family Code.
   (b) A member shall make separate designations for benefits payable
under the Defined Benefit Program and the Defined Benefit Supplement
Program.  Each designation shall be in writing on a form prescribed
by the system, executed by the member, and witnessed by two witnesses
who are not designated as beneficiary for benefits payable under
either the Defined Benefit Program or the Defined Benefit Supplement
Program.  A member may designate the same beneficiary for benefits
payable under the Defined Benefit Program and the Defined Benefit
Supplement Program, or may designate a different beneficiary for
each.
   (c) A beneficiary designation shall not be valid unless it is
received in the office of the system in Sacramento prior to the
member's death.
   (d) A member may change or revoke a beneficiary designation at any
time by making a new designation pursuant to this section.
   (e) This section shall not be applicable to the designation of an
option beneficiary or an annuity beneficiary under this part.
  SEC. 51.  Section 23881 of the Education Code is repealed.
  SEC. 52.  Section 23881 is added to the Education Code, to read:
   23881.  (a) If upon receipt of proof of death of a retired member
who was receiving an unmodified allowance and who retired under this
part after June 30, 1972, there is a remaining balance of the member'
s accumulated retirement contributions, the balance shall be paid to
the member's beneficiary.
   (b) Upon receipt of proof of death of a retired member's option
beneficiary after the beneficiary begins to receive an allowance, the
remaining balance of a member's accumulated retirement
contributions, if any, shall be paid to the beneficiary designated by
the option beneficiary to receive that payment.
   (c) The remaining balance of a retired member's accumulated
retirement contributions shall be the difference between the balance
of the accumulated retirement contributions on the effective date of
the member's retirement and the total retirement allowance paid or
payable to the retired member on the date of the member's death. If
the retired member predeceased the option beneficiary, the remaining
balance of the retired member's accumulated retirement contributions
shall be the difference between the balance of the accumulated
retirement contributions on the effective date of the member's
retirement and the total retirement allowance paid or payable to the
retired member and the option beneficiary on the date of the option
beneficiary's death.
   (d) Payments pursuant to this section shall include interest on
the remaining balance of accumulated retirement contributions
calculated from the date the last allowance payment was made to the
date the remaining balance of accumulated retirement contributions is
paid.
  SEC. 53.  Section 24202.5 of the Education Code is amended to read:

   24202.5.  (a) A member who retires for service on or after January
1, 1999, shall receive a retirement allowance consisting of all of
the following:
   (1) An annual allowance payable in monthly installments, upon
retirement equal to the percentage of the final compensation set
forth opposite the member's age at retirement in the following table
multiplied by each year of credited service:


  Age at Retirement                Percentage
  60 ............................  2.00
  60 1/4 ........................  2.033
  60 1/2 ........................  2.067
  60 3/4 ........................  2.10
  61 ............................  2.133
  61 1/4 ........................  2.167
  61 1/2 ........................  2.20
  61 3/4 ........................  2.233
  62 ............................  2.267
  62 1/4 ........................  2.30
  62 1/2 ........................  2.333
  62 3/4 ........................  2.367
  63 and over ...................  2.40

   If the member's retirement is effective at less than normal
retirement age and between early retirement age and normal retirement
age, the member's allowance shall be reduced by one-half of 1
percent for each full month, or fraction of a month that will elapse
until the member will attain normal retirement age.
   (2) An annuity that shall be the actuarial equivalent of the
member's accumulated annuity deposit contributions at the time of
retirement.
   (3) An annuity based on the balance of credits in the member's
Defined Benefit Supplement account, pursuant to Section 25012, if
elected by the member pursuant to Section 25011.
   (b) In computing the amounts described in paragraph (1) of
subdivision (a), the age of the member on the last day of the month
in which the retirement allowance begins to accrue or the later date
as provided in Section 24204 shall be used.
  SEC. 54.  Section 24206 of the Education Code is amended to read:
   24206.  The minimum unmodified allowance for service retirement
under the Defined Benefit Program, exclusive of annuities payable
from accumulated annuity deposit contributions and exclusive of the
balance of credits in the member's Defined Benefit Supplement
account, shall not be less than ten dollars ($10) per month
multiplied by the member's years of credited service.  This
guaranteed amount shall be reduced by the amount of an unmodified
allowance payable from a local system based on service credited under
the Defined Benefit Program.  If the retirement is effective at less
than age 60 years this allowance shall be reduced by one-half of 1
percent for each full month or fraction of a month that will elapse
until the member would have reached age 60 years.
  SEC. 55.  Section 24300.5 is added to the Education Code, to read:

   24300.5.  An option beneficiary who is receiving an allowance
pursuant to the option elected by the member may designate a
beneficiary to receive any remaining balance of the retired member's
accumulated retirement contributions payable pursuant to Section
23881 upon the death of the option beneficiary.
  SEC. 56.  Section 24305.3 is added to the Education Code, to read:

   24305.3.  (a) A member who is receiving a joint and survivor
annuity under the Defined Benefit Supplement Program may change the
annuity or the annuity beneficiary elected pursuant to Section 25011
or 25018 provided all of the following conditions are met:
   (1) The annuity beneficiary is the member's spouse or former
spouse.
   (2) A final decree of dissolution of marriage is granted, or a
judgment of nullity is entered, or an order of separate maintenance
is made by a court of competent jurisdiction with respect to the
member and the spouse or former spouse on or after the beginning of
the initial plan year designated by the board pursuant to Section
22156.05.
   (3) The change is consistent with the final decree of dissolution,
judgment of nullity, or order of separate maintenance.
   (b) A member may change the annuity pursuant to subdivision (a)
before or after the first annuity payment is issued.
   (c) The member shall notify the system in writing of the change in
the annuity. The notification shall not be earlier than the
effective date of the final decree of dissolution, judgment of
nullity, or order of separate maintenance and shall include a
certified copy of the final decree of dissolution, judgment of
nullity, or order of separate maintenance, and any property
settlement agreement.
   (d) A change in the annuity or annuity beneficiary or both shall
become effective on the date the notification of change is received
by the system.  The annuity amount payable to the member upon the
change elected by the member shall be determined as of the effective
date of the change and shall be the actuarial equivalent of the
lump-sum that would otherwise be payable to the member as of the date
of the change. If the member elects a joint and survivor annuity,
the amount payable under the annuity shall be modified consistent
with the annuity elected by the member.
  SEC. 57.  Section 24402 of the Education Code is amended to read:
   24402.  (a) Service retirement allowances, retirement annuities,
disability allowances, disability retirement allowances, disability
annuities, family allowances, and survivor benefit allowances payable
pursuant to this part shall be increased by application of the
benefit improvement factor.
   (b) Allowances payable to beneficiaries on account of options
elected under Section 24300, 24301, or 24307 and annuities payable to
annuity beneficiaries under the Defined Benefit Supplement Program
shall be increased by application of the improvement factor.  This
factor shall be applicable on the same date when it would have been
applied to the allowance of the deceased person.
   (c) The benefit improvement factor shall not be applied to an
annuity that is the actuarial equivalent of the accumulated annuity
deposit contributions standing to the credit of the member's account
on the effective date of a service or disability retirement.
  SEC. 58.  Section 24411 of the Education Code is amended to read:
   24411.  (a) (1) Annual cost-of-living adjustments for retired
members, disabled members, and beneficiaries in excess of the
2-percent adjustment authorized by Section 22140 may be included as a
General Fund appropriation in the annual Budget Act.  In the annual
budget submitted to the Legislature, the Governor shall include a
budget item equal to 5 percent
     of the average annualized statewide increase in payroll for
certificated personnel over the three previous school years among
school districts, county offices of education, and community college
districts.
   (2) The amount submitted in the annual Budget Act pursuant to this
section shall be considered as part of the overall budget
allocations to the public schools and community colleges.
   (b) The annual appropriation shall be made to the system on July
1, and shall be placed in a segregated account called the Retirees'
Purchasing Power Protection Account.  The proceeds of that account
are continuously appropriated and shall be distributed annually in
quarterly payments commencing on September 1 to retired members,
disabled members, and beneficiaries under the Defined Benefit Program
as follows:
   (1) The proceeds shall be allocated among those retired members,
disabled members, and beneficiaries under the Defined Benefit Program
whose allowances, after applying the 2-percent adjustment authorized
by Section 22140, have the lowest purchasing power percentage, based
on the amount that would be paid had the original allowance been
increased by the increases in the index then being used by the
Department of Finance to measure changes in the cost of living,
increasing those allowances to a common minimum purchasing power
level.  In any year in which the purchasing power of the allowances
of all retired members, disabled members, and beneficiaries under the
Defined Benefit Program equals not less than 75 percent and
additional funds remain from the allocation authorized by this
section, those funds shall be allocated by the board to general
accounts to reduce the unfunded actuarial liability of the fund.
   (2) The board may deduct from the annual appropriation an amount
necessary for administrative expenses to implement this section.
   (c) The board shall inform each recipient of an allowance under
subdivision (b) that the increases are not cumulative, are not part
of the base allowance, and shall be available only as appropriated
annually in the Budget Act.
   (d) The adjustments authorized by this section shall not be
included in the base allowance for purposes of calculating the
2-percent adjustment authorized by Section 22140.
   (e) It is the ultimate intent and purpose of the Legislature in
amending this section by Chapters 323 and 780 of the Statutes of
1983, to achieve a common minimum purchasing power level equal to 75
percent of the purchasing power of the original allowance.  It is the
present intent of the Legislature that until adequate funds are
available to fulfill the ultimate intent, those persons whose
allowances have been most impacted by inflation shall be accorded
first priority in receiving, pursuant to this section, supplemental
cost-of-living adjustments from the Retirees' Purchasing Power
Protection Account.
   (f) This section shall not be operative in any fiscal year during
which, as determined by the board, distributions provided for by
Section 24415 are being made.
  SEC. 59.  Section 24412 of the Education Code is amended to read:
   24412.  (a) The annual revenues deposited to the Teachers'
Retirement Fund pursuant to Section 6217.5 of the Public Resources
Code are continuously appropriated without regard to fiscal year for
the purposes of this section and shall be distributed annually in
quarterly supplemental payments commencing on September 1 of each
year to retired members, disabled members, and beneficiaries under
the Defined Benefit Program.  The amount available for distribution
in any year shall be the income for that year from the sale or use of
school lands and lieu lands, as estimated by the State Lands
Commission prior to the beginning of the fiscal year, adjusted by the
difference between the estimated and actual income for the preceding
fiscal year.  The board shall deduct from the revenues an amount
necessary for administrative expenses to implement this section.
   (b) The net revenues to be distributed shall be allocated among
those retired members, disabled members, and beneficiaries, as
defined in subdivision (a) of Section 22107, whose allowances under
the Defined Benefit Program, after sequentially applying the annual
improvement factor as defined in Section 22140 and the annual
supplemental payment as specified in Section 24411, if any, are below
75 percent of the original purchasing power.  The purchasing power
calculation for each individual allowance shall be based on the
change in the All Urban California Consumer Price Index between June
of the calendar year of retirement and June of the fiscal year
preceding the fiscal year of the distribution.  The allocation shall
provide a pro rata share of the amount needed to restore the
allowance payable, after sequential application of the current year
annual improvement factor and the supplemental payment under Section
24411, to 75 percent of the original purchasing power.
   (c) The allowance increase shall not be applicable to annuities
payable from the accumulated annuity deposit contributions or the
accumulated tax-sheltered annuity contributions.
   (d) In any year that the net revenues from school lands and lieu
lands is greater than that needed to adjust the allowances of all
retired members, disabled members, and beneficiaries, as defined in
subdivision (a) of Section 22107, under the Defined Benefit Program
to 75 percent of the original purchasing power, the net revenues in
excess of that needed for distribution shall be used by the board to
reduce the unfunded actuarial obligation of the fund.
   (e) The board shall inform each recipient of supplemental payments
under this section that the increases are not cumulative and are not
part of the base allowance.
  SEC. 60.  Section 24415 of the Education Code is amended to read:
   24415.  (a) The proceeds of the Supplemental Benefit Maintenance
Account shall be distributed annually in quarterly supplemental
payments commencing on September 1, 1990, to retired members,
disabled members, and beneficiaries, as defined in subdivision (a) of
Section 22107.  The amount available for distribution in any fiscal
year shall not exceed the amount necessary to restore purchasing
power up to 75 percent of the purchasing power of the initial monthly
allowance after the application of all allowance increases
authorized by this part, including those specified in Section 24412.

   (b) The net revenues to be distributed shall be allocated among
those retired members, disabled members, and beneficiaries, as
defined in subdivision (a) of Section 22107, whose allowances, after
sequentially applying the annual improvement factor as defined in
Sections 22140 and 22141, and the annual supplemental payment as
specified in Section 24412, have the lowest purchasing power
percentage.  The purchasing power calculation for each individual
shall be based on the change in the All Urban California Consumer
Price Index between June of the calendar year of retirement and June
of the fiscal year preceding the fiscal year of distribution.  In any
year in which the purchasing power of the allowances of all retired
members, disabled members, and beneficiaries, as defined in
subdivision (a) of Section 22107, equals not less than 75 percent and
additional funds remain from the allocation authorized by this
section, those funds shall remain in the Supplemental Benefit
Maintenance Account for allocation in future years.
   (c) The allowance increase shall not be applicable to annuities
payable from the accumulated annuity deposit contributions or the
accumulated tax-sheltered annuity contributions.
   (d) The increases provided by subdivision (b) are not cumulative,
not part of the base allowance, and will be payable only to the
extent that funds are available from the Supplemental Benefit
Maintenance Account.  The board shall inform each recipient of the
contents of this subdivision.
   (e) The adjustments authorized by this section are vested only up
to the amount payable as a result of the annual appropriation made
pursuant to Section 22954 and shall not be included in the base
allowance for purposes of calculating the annual improvement defined
by Sections 22140 and 22141.
  SEC. 61.  Section 24417 of the Education Code is amended to read:
   24417.  (a) The proceeds of an auxiliary Supplemental Benefit
Maintenance Account shall be distributed annually in quarterly
supplemental payments, commencing when funds in the Supplemental
Benefit Maintenance Account are insufficient to support 75 percent,
to retired members, disabled members, and beneficiaries, as defined
in subdivision (a) of Section 22107.  The amount available for
distribution in any fiscal year shall not exceed the amount necessary
to restore purchasing power up to 75 percent of the purchasing power
of the initial monthly allowance after the application of all
allowance increases authorized by this part, including those
specified in Sections 24412 and 24415.
   (b) The net revenues to be distributed shall be allocated among
those retired members, disabled members, and beneficiaries, as
defined in subdivision (a) of Section 22107, whose allowances, after
sequentially applying the annual improvement factor as defined in
Sections 22140 and 22141, and the annual supplemental payment as
specified in Sections 24412 and 24415, have the lowest purchasing
power percentage.  The purchasing power calculation for each
individual shall be based on the change in the All Urban California
Consumer Price Index between June of the calendar year of the benefit
effective date and June of the fiscal year preceding the fiscal year
of distribution.
   (c) The allowance increase shall not be applicable to annuities
payable from the accumulated annuity deposit contributions or the
accumulated tax-sheltered annuity contributions.
   (d) The increases provided by subdivision (b) are not cumulative,
nor part of the base allowance, and will be payable only to the
extent that funds are available from the Supplemental Benefit
Maintenance Account and the auxiliary Supplemental Benefit
Maintenance Account.  The board shall inform each recipient of the
contents of this subdivision.
   (e) The distributions authorized by this section are vested only
up to the amount payable as a result of the annual appropriation made
pursuant to Section 22954 and shall not be included in the base
allowance for purposes of calculating the annual improvement defined
by Sections 22140 and 22141.
  SEC. 62.  Section 24600 of the Education Code is amended to read:
   24600.  (a) A retirement allowance under this part begins to
accrue on the effective date of the member's retirement and ceases on
the earlier of the day of the member's death or the day on which the
retirement allowance is terminated for a reason other than the
member's death.
   (b) A retirement allowance payable to an option beneficiary under
this part begins to accrue on the day following the day of the
retired member's death and ceases on the day of the option
beneficiary's death.
   (c) A disability allowance under this part begins to accrue on the
effective date of the member's disability and ceases on the earlier
of the day of the member's death or the day on which the disability
allowance is terminated for a reason other than the member's death.
   (d) A family allowance under this part begins to accrue on the day
following the day of the member's death and ceases on the day of the
event that terminates eligibility for the allowance.
   (e) A survivor benefit allowance payable to a surviving spouse
under this part pursuant to Chapter 23 (commencing with Section
23850) begins to accrue on the day the member would have attained 60
years of age or on the day following the day of the member's death,
as elected by the surviving spouse, and ceases on the day of the
surviving spouse's death.
   (f) A child's portion of an allowance under this part begins to
accrue on the effective date of that allowance and ceases on the
earlier of either the termination of the child's eligibility or the
termination of the allowance.  An allowance payable because of a
full-time student shall terminate on the first day of the month
following the end of the school quarter or semester that is in
progress in the month the full-time student attains 22 years of age.
Any adjustment to an allowance because of a full-time student's
periods of nonattendance shall be made as follows:  the allowance
shall cease on the first day of the month in which return to
full-time attendance was required and shall begin to accrue again on
the first day of the month in which full-time attendance resumes.
   (g) Supplemental payments issued under this part pursuant to
Sections 24701, 24702, and 24703 to retired members, disabled
members, and beneficiaries shall begin to accrue pursuant to Sections
24701, 24702, and 24703 and shall cease to accrue as of the
termination dates specified in subdivisions (a) to (f), inclusive.
   (h) Notwithstanding any other provision of this part or other law,
distributions payable under the plan with respect to the Defined
Benefit Program and the Defined Benefit Supplement Program shall be
made in accordance with applicable provisions of the Internal Revenue
Code of 1986, as amended, and related regulations.  The required
beginning date of benefit payments that represent the entire interest
of the member in the plan with respect to the Defined Benefit
Program and the Defined Benefit Supplement Program shall be either:
   (1) In the case of a refund of contributions, as described in
Chapter 18 (commencing with Section 23100) of this part, and
distribution of an amount equal to the balance of credits in a member'
s Defined Benefit Supplement account, as described in Chapter 38
(commencing with Section 25000) of this part, not later than April 1
of the calendar year following the later of (A) the calendar year in
which the member attains 70 1/2 years of age or (B) the calendar year
in which the member terminates employment within the meaning of
subdivision (i).
   (2) In the case of a retirement allowance, as defined in Section
22166, beginning not later than April 1 of the calendar year
following the later of (A) the calendar year in which the member
attains 70 1/2 years of age or (B) the calendar year in which the
member terminates employment within the meaning of subdivision (i),
to continue over the life of the member or the lives of the member
and the member's option beneficiary, or over the life expectancy of
the member or the life expectancy of the member and the member's
option beneficiary.
   (i) For purposes of subdivision (h), "terminates employment" means
the later of:
   (1) The date the member ceases to perform creditable service
subject to coverage under this plan.
   (2) The date the member ceases employment in a position subject to
coverage under another public retirement system in this state if the
compensation earnable while a member of the other system may be
considered in the determination of final compensation pursuant to
Section 22134, 22135, or 22136.
  SEC. 63.  Section 25000 of the Education Code is amended and
renumbered to read:
   25900.   (a) The State Teachers' Retirement System shall develop a
program to provide health care benefits for members, beneficiaries,
children, and dependent parents.
   (b) All costs incurred by the system pursuant to this part shall
be paid by allocations from the Teachers' Retirement Fund as
appropriated for that purpose.
   (c) The health care benefits program developed by the system
pursuant to this part shall not be implemented by the system unless
specifically authorized by a statute enacted by the Legislature.
  SEC. 64.  Section 25100 of the Education Code is amended and
renumbered to read:
   25901.   Unless the context otherwise requires, the definitions
set forth in this chapter govern the construction of this part.
  SEC. 65.  Section 25110 of the Education Code is amended and
renumbered to read:
   25910.   "Beneficiary" or "beneficiaries" means any person or
entity receiving or entitled to receive an allowance and payment
pursuant to Part 13 (commencing with Section 22000) or 14 (commencing
with Section 26000) because of the disability or death of a member.

  SEC. 66.  Section 25115 of the Education Code is amended and
renumbered to read:
   25915.   (a) "Dependent child" or "dependent children" means a
member's unmarried offspring or stepchild who is not older than 22
years of age and who is financially dependent upon the member on the
date the member becomes eligible for benefits pursuant to this part.

   (b) "Offspring" shall include the member's child who is born
within the 10-month period commencing on the date the member becomes
eligible for benefits pursuant to this part.
   (c) "Offspring" shall include a child adopted by the member.
   (d) "Dependent child" shall not include the member's offspring or
stepchild who is adopted by a person other than the member's spouse.

   (e) "Financially dependent," for purposes of this section, means
that at least one-half of the child's support was being provided by
the member on the date the member became eligible for benefits
pursuant to this part.  The system may require that income tax
records or other data be submitted to substantiate the child's
financial dependence.  In the absence of substantiating
documentation, the system may determine that the child was not
dependent on the date the member became eligible for benefits
pursuant to this part.
  SEC. 67.  Section 25120 of the Education Code is amended and
renumbered to read:
   25920.   "Dependent parent" or "dependent parents" means a natural
parent or parents of a member, or a parent or parents who adopted
the member prior to the earlier of the occurrence of the member's
marriage or his or her attaining 18 years of age, and who was
receiving one-half or more of his or her support from the member at
the time the member became eligible for benefits pursuant to this
part.
  SEC. 68.  Section 25125 of the Education Code is amended and
renumbered to read:
   25925.   "Member" means a current or retired employee of an
employer, as defined in Section 22131.
  SEC. 69.  Chapter 38 (commencing with Section 25000) is added to
Part 13 of Division 1 of Title 1 of the Education Code, to read:

      CHAPTER 38.  DEFINED BENEFIT SUPPLEMENT PROGRAM
      Article 1.  General Provisions

   25000.  The Defined Benefit Supplement Program is hereby
established to provide supplemental benefits for members of the
Defined Benefit Program.  The Teachers' Retirement Board shall
administer the Defined Benefit Supplement Program in accordance with
the provisions of this chapter.
   25000.5.  The design and administration of the Defined Benefit
Supplement Program shall comply with the applicable provisions of the
Internal Revenue Code and the Revenue and Taxation Code.  The board
may amend the plan with respect to the Defined Benefit Supplement
Program to do any of the following:
   (a) Comply with applicable federal law and regulations to the
extent permitted by law.
   (b) Adopt or amend actuarial assumptions.
   (c) Designate the initial plan year.
   (d) Establish and revise the minimum interest rate.
   (e) Declare an additional earnings credit.
   (f) Declare an additional annuity credit.
   25000.7.  (a) A member shall have a vested right to a benefit
under the Defined Benefit Supplement Program in an amount equal to
the balance of credits in the member's Defined Benefit Supplement
account.  That right shall accrue when the member's Defined Benefit
Supplement account is established pursuant to Section 25004.
   (b) If a person becomes entitled to a distribution from the
program under this part that constitutes an eligible rollover
distribution within the meaning of Section 401(a)(31) of Title 26 of
the United States Code, the person may elect, under terms and
conditions established by the board, to have the distribution or a
portion thereof paid directly to a plan that constitutes an eligible
retirement plan within the meaning of Section 401(a)(31), as
specified by that person.  Upon the exercise of the election by a
person with respect to a distribution or a portion thereof, the
distribution from the program of the amount so designated, once
distributable under the terms of the program, shall be made in the
form of a direct rollover to the eligible retirement plan so
specified.

      Article 2.  Program Accounts

   25001.  (a) The board shall establish a segregated account within
the retirement fund to be known as the Gain and Loss Reserve, and the
board shall have sole authority over the reserve.  The Gain and Loss
Reserve shall be maintained for the Defined Benefit Supplement
Program and may be used to credit interest at the minimum interest
rate for plan years in which the board determines that the obligation
cannot be met from investment earnings.  The Gain and Loss Reserve
may also be used to provide additions to the Annuitant Reserve for
monthly annuities payable under the Defined Benefit Supplement
Program.
   (b) The board shall establish a goal for the balance of the Gain
and Loss Reserve and periodically shall review the sufficiency of the
reserve based on the recommendations of the actuary.
   (c) The board may allocate excess earnings of the plan with
respect to assets attributable to the Defined Benefit Supplement
Program to the Gain and Loss Reserve.  Upon the recommendation of the
actuary, the board shall determine annually the amount, if any, that
is to be allocated to the Gain and Loss Reserve for that plan year.
That determination shall be made upon recommendation of the actuary
after adoption of the actuarial valuation undertaken following the
plan year pursuant to Section 22311.5, but no later than June 30
following the end of the plan year.  In determining whether to
allocate excess earnings to the Gain and Loss Reserve, the board
shall consider all of the following:
   (1) Whether or not the plan has excess earnings attributable to
the Defined Benefit Supplement Program.
   (2) The sufficiency of the Gain and Loss Reserve in light of the
goal established pursuant to subdivision (b).
   (3) The amount required for the plan's administrative costs with
respect to the Defined Benefit Supplement Program.
   (4) The amount required for crediting members' accounts at the
minimum interest rate.
   25002.  The board shall establish and maintain a segregated
account within the retirement fund to be known as the Annuitant
Reserve and the board shall have sole authority over the reserve.
The Annuitant Reserve shall be used for the payment of annuities
under the Defined Benefit Supplement Program.  The board shall
transfer the balance in a member's accumulated Defined Benefit
Supplement account to the reserve when a benefit is to be paid as an
annuity.
   25003.  The board may transfer amounts between the Gain and Loss
Reserve and the Annuitant Reserve upon the recommendation of the
actuary.
   25004.  Member accounts under the Defined Benefit Supplement
Program shall be nominal accounts.  Member contributions and employer
contributions on behalf of the member that are specifically
identified as creditable to the Defined Benefit Supplement Program
shall be treated as credits to the member's Defined Benefit
Supplement account, together with interest credited at the minimum
interest rate and additional earnings credit thereon.  The balance of
credits in a member's account shall determine the amount to which
the member is entitled under the Defined Benefit Supplement Program
upon termination of employment subject to coverage by the plan.  The
member shall not have a right or claim to any specific assets of the
account, program, plan, or retirement fund.
   25005.  (a) Prior to July 1 of the initial plan year, and prior to
the beginning of each plan year thereafter, the board shall adopt a
plan amendment with respect to the Defined Benefit Supplement Program
to declare the rate at which interest shall be credited to Defined
Benefit Supplement accounts for the following plan year.
   (b) The minimum interest rate declared annually by the board shall
be in accordance with applicable federal laws and related
regulations and shall not be less than the rate at which interest is
credited under the Defined Benefit Program.
   (c) Interest shall be credited to Defined Benefit Supplement
accounts and shall be computed at the minimum interest rate on the
balance of credits in a member's account and shall be compounded
daily.
   (d) Credited interest shall not be applied to the balance of
credits in a member's Defined Benefit Supplement account that has
been transferred to the Annuitant Reserve.
   25006.  (a) The board may declare an additional earnings credit to
be applied to Defined Benefit Supplement accounts for a plan year.
Prior to declaring an additional earnings credit, the board shall
consider all of the following:
   (1) Whether the plan's investment earnings with respect to the
Defined Benefit Supplement Program for the plan year exceed the
amount required to meet the liabilities identified in paragraphs (2),
(3), and (4).
   (2) The amount required for the plan year to credit interest on
members' nominal accounts at the minimum interest rate.
   (3) The amount of the plan's administrative expenses with respect
to the Defined Benefit Supplement Program for the plan year.
   (4) The sufficiency of the Gain and Loss Reserve and whether any
additions must be made to that reserve.
   (b) For any plan year that the board declares an additional
earnings credit, the board shall specify the amount to be added to
members' accounts as a percentage increase.  The additional earnings
credit shall be applied to the balance of credits in each member's
nominal account as of the last day of the plan year and shall be
applied as of the date specified by the board.  The additional
earnings credit shall not be added to the balance of credits in a
member's Defined Benefit Supplement account that has been transferred
to the Annuitant Reserve.
   (c) The declaration of an additional earnings credit shall be made
as a plan amendment adopted by the board with respect to the Defined
Benefit Supplement Program upon recommendation of the actuary after
adoption of the actuarial valuation undertaken following the plan
year pursuant to Section 22311.5, but no later than June 30 following
the end of the plan year.
   25007.  When the board declares an additional earnings credit for
a plan year, the board also may declare by plan amendment an
additional annuity credit, for members and annuity beneficiaries who
are receiving an annuity, based on the balance of
                         credits transferred from the member's
Defined Benefit Supplement account to the Annuitant Reserve.  The
additional annuity credit, if declared by the board, shall be paid in
a lump-sum.  In addition to the considerations specified in Section
25006, prior to declaring an additional earnings credit, the board
shall consider both of the following:
   (a) The amount required for the plan year to apply the additional
earnings credit to the Defined Benefit Supplement accounts of members
who are not receiving an annuity under the Defined Benefit
Supplement Program for the plan year.
   (b) Any other obligations incurred by the plan with respect to the
Defined Benefit Supplement Program.
   25008.  (a) A member's right to an amount equal to the balance of
credits in the member's Defined Benefit Supplement account shall be
vested at the time contributions are initially credited to the member'
s account.
   (b) A partial distribution of the amount equal to the balance of
credits in a member's Defined Benefit Supplement account shall not be
made, except as provided in Section 25009 or 25016.

      Article 3.  Retirement Benefits

   25009.  (a) A member's retirement benefit under the Defined
Benefit Supplement Program shall be an amount equal to the balance of
credits in the member's Defined Benefit Supplement account on the
date the retirement benefit becomes payable.
   (b) A retirement benefit shall be a lump-sum payment, or an
annuity payable in monthly installments, or a combination of both a
lump-sum payment and an annuity, as elected by the member on the
application for a retirement benefit.
   (c) Upon distribution of the entire retirement benefit in a
lump-sum payment, no other benefit shall be payable to the member or
the member's beneficiary under the Defined Benefit Supplement
Program.
   25010.  (a) A member who meets the following eligibility
requirements may receive a retirement benefit under the Defined
Benefit Supplement Program:
   (1) The member has terminated all employment to perform creditable
service subject to coverage by the plan.  The member's employer, or
employers if the member has multiple employers, shall certify on a
form prescribed by the system that the member's employment has been
terminated.
   (2) The member has retired for service under the Defined Benefit
Program pursuant to Chapter 27 (commencing with Section 24201).
   (b) A member shall submit an application for a retirement benefit
on a form prescribed by the system.
   25011.  (a) A member may elect to receive the retirement benefit
as an annuity payable in monthly installments, provided the balance
of credits in the member's Defined Benefit Supplement account on the
date the retirement benefit becomes payable equals at least three
thousand five hundred dollars ($3,500).
   (b) If the member elects to receive the retirement benefit as an
annuity, the member shall elect one of the following forms of
payment:
   (1) A single life annuity without a cash refund feature.  This
form of payment is the actuarial equivalent of the amount that would
be payable to the member if the member elected to receive the
retirement benefit in a lump-sum payment.  Upon the death of the
member, no other benefit shall be payable to the member's beneficiary
under the Defined Benefit Supplement Program.
   (2) A single life annuity with a cash refund feature.  This form
of payment is the actuarial equivalent of the amount that would be
payable to the member if the member elected to receive the retirement
benefit in a lump-sum payment.  Upon the death of the member, an
amount equal to the remaining balance, if any, of credits transferred
from the member's Defined Benefit Supplement account to the
Annuitant Reserve shall be returned in a lump-sum payment to the
member's beneficiary.
   (3) A 100 percent joint and survivor annuity.  This form of
payment is the actuarial equivalent of the lump-sum payment modified
to be payable over the combined lives of the member and the member's
annuity beneficiary.  Upon the death of the member, the same monthly
amount that was payable to the member shall be paid monthly to the
member's surviving annuity beneficiary.  If the annuity beneficiary
predeceases the member, the annuity shall be payable to the member
without modification as of the day following the date of the annuity
beneficiary's death upon receipt by the system of proof of the
annuity beneficiary's death.
   (4) A 50 percent joint and survivor annuity.  This form of payment
is the actuarial equivalent of the lump-sum payment modified to be
payable over the combined lives of the member and the member's
annuity beneficiary.  Upon the death of the member, one-half of the
monthly amount that was payable to the member shall be paid monthly
to the member's surviving annuity beneficiary.  If the annuity
beneficiary predeceases the member, the annuity shall be payable to
the member without modification as of the day following the date of
the annuity beneficiary's death upon receipt by the system of proof
of the annuity beneficiary's death.
   (5) A period certain annuity.  This form of payment is an annuity
equal to the actuarial equivalent of the balance of credits in the
member's Defined Benefit Supplement account on the date the
retirement benefit becomes payable.  The annuity shall be payable
over a specified number of years, from a minimum of three years to a
maximum of 10 years, until the annuity amount paid equals the amount
of credits that was in the member's Defined Benefit Supplement
account.  However, the annuity period shall not exceed the life
expectancy of the member, or the life expectancy of the member and
the member's annuity beneficiary.  If the member's death occurs prior
to the end of the period certain, the remaining balance of payments
shall be paid to the member's annuity beneficiary pursuant to Section
25022.
   (c) The actuarial equivalent of the balance of credits in the
member's Defined Benefit Supplement account shall reflect increases
in annuity payments to be made in the future pursuant to Section
24402, unless the member elected a period certain annuity.

      Article 4.  Annuities

   25012.  An annuity payable under the Defined Benefit Supplement
Program shall be determined as a value actuarially equivalent to the
balance of credits in the member's Defined Benefit Supplement account
on the date the benefit becomes payable and after any lump-sum
payment.  If a single life annuity is elected, the annuity shall be
calculated using the age of the member on the date the benefit
becomes payable.  If a joint and survivor annuity is elected, the
annuity shall be calculated using the age of the member and the age
of the member's beneficiary on the date the benefit becomes payable.

   25013.  Upon election by the member to receive a benefit payable
under the Defined Benefit Supplement Program in the form of an
annuity, the balance of credits in the member's Defined Benefit
Supplement account shall be transferred to the Annuitant Reserve.
   25014.  (a) If a member reinstates from service retirement under
this part, payment of a retirement annuity based on the balance of
credits that was transferred from the member's Defined Benefit
Supplement account to the Annuitant Reserve shall terminate.  The
member's Defined Benefit Supplement account shall be credited with
the actuarial equivalent of the member's annuity as of the date the
annuity is terminated and the Annuitant Reserve shall be reduced by
the amount credited to the member's account.
   (b) The actuarial equivalent of the annuity on the date the
annuity is terminated shall be calculated using the actuarial
assumptions that were in effect on the date the retirement annuity
became payable.  In determining the actuarial equivalent, the age of
the member on the date the retirement annuity became payable shall be
used if the member was receiving a single life annuity.  If the
member was receiving a joint and survivor annuity, the age of the
member and the age of the member's annuity beneficiary on the date
the retirement annuity became payable shall be used to determine the
actuarial equivalent.
   (c) If the member subsequently retires again, an annuity based on
the remaining balance of credits in the member's Defined Benefit
Supplement account at the time of the subsequent retirement shall
become payable pursuant to Section 24202.5 and the balance of credits
in the member's Defined Benefit Supplement account shall be
transferred to the Annuitant Reserve.
   25015.  (a) If a member elects to receive a benefit payable under
the Defined Benefit Supplement Program as a joint and survivor
annuity, the member shall designate an annuity beneficiary on the
benefit application.  The annuity beneficiary designation shall not
be changed after the date the benefit becomes payable to the member,
except as provided in Chapter 12 (commencing with Section 22650).
   (b) A member who elects to receive a joint and survivor annuity
may designate more than one annuity beneficiary.  If the member
designates multiple annuity beneficiaries, the member shall specify
the percentage of the annuity payable to each annuity beneficiary
upon the death of the member.  The annuity amount payable to the
member during his or her lifetime shall be modified to be payable
over the combined lives of the member and the annuity beneficiaries.

   (c) If the member predeceases an annuity beneficiary, the annuity
beneficiary may designate a payee to receive an amount that may be
payable in a lump-sum pursuant to Section 25023 upon the death of the
annuity beneficiary.

      Article 5.  Disability Benefits

   25016.  (a) A member's disability benefit under the Defined
Benefit Supplement Program shall be an amount equal to the balance of
credits in the member's Defined Benefit Supplement account on the
date the disability benefit becomes payable.
   (b) A disability benefit shall be a lump-sum payment, or an
annuity payable in monthly installments, or a combination of both a
lump-sum payment and an annuity, as elected by the member on the
application for a disability benefit.
   (c) Upon distribution of the entire disability benefit in a
lump-sum payment, no other benefit shall be payable to the member or
the member's beneficiary under the Defined Benefit Supplement
Program.
   25017.  (a) A member who meets the following eligibility
requirements may receive a disability benefit under the Defined
Benefit Supplement Program:
   (1) The member has terminated all employment to perform creditable
service subject to coverage by the plan.  The member's employer, or
employers if the member has multiple employers, shall certify on a
form prescribed by the system that the member's employment has been
terminated.
   (2) The member has been approved to receive a disability allowance
pursuant to Chapter 25 (commencing with Section 24001) or a
disability retirement allowance pursuant to Chapter 26 (commencing
with Section 24100) under the Defined Benefit Program.
   (b) The member, or the member's employer or conservator on behalf
of the member, shall submit an application for a disability benefit
on a form prescribed by the system.
   25018.  (a) A member may elect to receive the disability benefit
as an annuity, payable in monthly installments, provided the balance
of credits in the member's Defined Benefit Supplement account on the
date the disability benefit becomes payable equals at least three
thousand five hundred dollars ($3,500).
   (b) If the member elects to receive the disability benefit as an
annuity, the member shall elect one of the following forms of
payment:
   (1) A single life annuity without a cash refund feature.  This
form of payment is the actuarial equivalent of the amount that would
be payable to the member if the member elected to receive the
disability benefit in a lump-sum payment.  Upon the death of the
member, no other benefit shall be payable to the member's beneficiary
under the Defined Benefit Supplement Program.
   (2) A single life annuity with a cash refund feature.  This form
of payment is the actuarial equivalent of the amount that would be
payable to the member if the member elected to receive the disability
benefit in a lump-sum payment.  Upon the death of the member, an
amount equal to the remaining balance, if any, of credits transferred
from the member's Defined Benefit Supplement account to the
Annuitant Reserve shall be returned in a lump-sum payment to the
member's beneficiary.
   (3) A 100 percent joint and survivor annuity.  This form of
payment is the actuarial equivalent of the lump-sum payment modified
to be payable over the combined lives of the member and the member's
annuity beneficiary.  Upon the death of the member, the same monthly
amount that was payable to the member shall be paid monthly to the
member's surviving annuity beneficiary.  If the annuity beneficiary
predeceases the member, the annuity shall be payable to the member
without modification as of the day following the date of the annuity
beneficiary's death upon receipt by the system of proof of the
annuity beneficiary's death.
   (4) A 50 percent joint and survivor annuity.  This form of payment
is the actuarial equivalent of the lump-sum payment modified to be
payable over the combined lives of the member and the member's
annuity beneficiary.  Upon the death of the member, one-half of the
monthly amount that was payable to the member shall be paid monthly
to the member's surviving annuity beneficiary.  If the annuity
beneficiary predeceases the member, the annuity shall be payable to
the member without modification as of the day following the date of
the annuity beneficiary's death upon receipt by the system of proof
of the annuity beneficiary's death.
   (5) A period certain annuity.  This form of payment is an annuity
equal to the actuarial equivalent of the balance of credits in the
member's Defined Benefit Supplement account on the date the
disability benefit becomes payable.  The annuity shall be payable
over a specified number of years, from a minimum of three years to a
maximum of 10 years, until the annuity amount paid equals the amount
of credits that was in the member's Defined Benefit Supplement
account.  However, the annuity period shall not exceed the life
expectancy of the member, or the life expectancy of the member and
the member's annuity beneficiary.  If the member's death occurs prior
to the end of the period certain, the remaining balance of payments
shall be paid to the member's annuity beneficiary pursuant to Section
25022.
   (c) The actuarial equivalent of the balance of credits in the
member's Defined Benefit Supplement account shall reflect increases
in annuity payments to be made in the future pursuant to Section
24402, unless the member elected a period certain annuity.
   25019.  (a) If a member's disability allowance or disability
retirement allowance under this part is terminated, payment of a
disability annuity based on the balance of credits transferred from
the member's Defined Benefit Supplement account to the Annuitant
Reserve also shall terminate.  The member's Defined Benefit
Supplement account shall be credited with the actuarial equivalent of
the member's annuity as of the date the annuity is terminated and
the Annuitant Reserve shall be reduced by the amount credited to the
member's account.
   (b) The actuarial equivalent of the annuity on the date the
annuity is terminated shall be calculated using the actuarial
assumptions that were in effect on the date the disability annuity
became payable.  In determining the actuarial equivalent, the age of
the member on the date the disability annuity became payable shall be
used if the member was receiving a single life annuity.  If the
member was receiving a joint and survivor annuity, the age of the
member and the age of the member's annuity beneficiary on the date
the disability allowance or disability retirement allowance became
payable shall be used to determine the actuarial equivalent.
   (c) If a disability allowance or disability retirement allowance
subsequently becomes payable again, an annuity based on the remaining
balance of credits in the member's Defined Benefit Supplement
account at the time of the subsequent disability or disability
retirement becomes payable and the balance of credits in the member's
Defined Benefit Supplement account shall be transferred to the
Annuitant Reserve.

      Article 6.  Final Benefits

   25020.  (a) A final benefit under the Defined Benefit Supplement
Program shall become payable to the member's beneficiary when the
system receives proof of the member's death.
   (b) If the member's death occurs before an annuity under the
Defined Benefit Supplement Program becomes payable, the final benefit
shall be an amount equal to the balance of credits in the member's
Defined Benefit Supplement account on the date of the member's death.

   (c) Upon distribution of a final benefit in a lump-sum payment, no
other benefit shall be payable under the Defined Benefit Supplement
Program to the member's beneficiary.
   25021.  (a) A beneficiary may elect to receive the final benefit
payable under the Defined Benefit Supplement Program as an annuity
payable in monthly installments provided the balance of credits in
the member's Defined Benefit Supplement account equals at least three
thousand five hundred dollars ($3,500).
   (b) A beneficiary who elects to receive an annuity shall elect one
of the following forms of payment:
   (1) A single life annuity without a cash refund feature.  This
form of payment is the actuarial equivalent of the amount that would
be payable to the beneficiary if the beneficiary elected to receive
the final benefit in a lump-sum payment.  The annuity shall cease to
be payable upon the death of the beneficiary, and no other benefit
will be payable under the Defined Benefit Supplement Program because
of the death of the member and the member's beneficiary.
   (2) A period certain annuity.  This form of payment is an annuity
equal to the actuarial equivalent of the balance of credits in the
member's Defined Benefit Supplement account on the date of the member'
s death.  The annuity shall be payable over a specified number of
years, from a minimum of three years to a maximum of 10 years, but
not to exceed the life expectancy of the beneficiary, until the
annuity amount paid equals the amount of credits that was in the
member's Defined Benefit Supplement account.  The beneficiary may
designate a payee to receive the remaining balance of payments if the
beneficiary's death occurs prior to the end of the period certain.
   (c) The actuarial equivalent of the balance of credits in the
member's Defined Benefit Supplement account shall reflect increases
in annuity payments to be made in the future pursuant to Section
24402, unless the member elected a period certain annuity.
   25022.  (a) If the death of a member occurs while the member is
receiving an annuity under the Defined Benefit Supplement Program,
the final benefit shall be payable in accordance with the terms of
the annuity elected by the member.
   (b) If the member was receiving a single life annuity without a
cash refund feature, a final benefit shall not be payable.
   (c) If the member was receiving a single life annuity with a cash
refund feature, the final benefit shall be payable in a lump-sum to
the member's beneficiary.
   (d) If the member was receiving a joint and survivor annuity, the
annuity shall continue to be paid to the surviving designated annuity
beneficiary.  If the designated annuity beneficiary predeceases the
member, a final benefit shall not be payable.
   (e) If the member was receiving a period certain annuity, the
remaining balance of payments shall be paid to the annuity
beneficiary designated by the member.
   25023.  (a) Upon the death of an annuity beneficiary who was
receiving an annuity under a joint and survivor annuity elected by
the member no further payment shall be made.
   (b) If the annuity beneficiary was receiving an annuity under a
joint and survivor option, no further payment shall be made.
   (c) Upon the death of a beneficiary who was receiving a single
life annuity without a cash refund feature, no further payment shall
be made.
   (d) Upon the death of a beneficiary who was receiving a period
certain annuity, the remaining balance of payments shall be paid in a
lump-sum to the payee designated by the beneficiary pursuant to
subdivision (c) of Section 25015.

      Article 6.  Termination Benefits

   25024.  (a) Upon the termination of all employment to perform
creditable service subject to coverage under the plan for a reason
other than retirement, disability, or death, a member shall be
eligible for a termination benefit under the Defined Benefit
Supplement Program.  The member's employer, or employers if the
member has multiple employers, shall certify on a form prescribed by
the system that the member's employment has been terminated.
   (b) A member shall submit an application for a termination benefit
on a form prescribed by the system.
   (c) The termination benefit shall be a lump-sum payment that is
equal to the balance of credits in the member's Defined Benefit
Supplement account.
   (d) Upon distribution of the termination benefit, no further
benefit shall be payable to the member or the member's beneficiary
under the Defined Benefit Supplement Program.
   25025.  A termination benefit under the Defined Benefit Supplement
Program shall be payable after one calendar year has elapsed
following the date the member terminated employment as specified in
Section 25024.  If the member performs creditable service within one
year of the prior termination of employment, the termination benefit
shall not be payable.
   25026.  The member may cancel an application for a termination
benefit at any time prior to distribution of the benefit.
